Gas Boom Will Spread To China Over Next 5 Years: IEA Report

The Golden Age of natural gas that North America is experiencing will expand to include China over the next five years as Chinese gas demand is expected to nearly double by 2019, the International Energy Agency (IEA) said in an annual report on Tuesday.

The energy watchdog predicts that Chinese gas demand will compensate for a slight slowdown in growth in many other areas of the world, and it expects global gas demand to rise by 2.2 percent a year by the end of 2019, a decline of .2 percent compared with the 2.4 percent growth forecast in last year’s report.

Liquefied natural gas (LNG) will meet much of the demand, particularly through private operators in Australia, Canada and the U.S. The IEA expected the LNG trade to grow by 40 percent through 2019 to reach 450 billion cubic meters (about 15.8 trillion cubic feet), with half of all new LNG exports coming from Australia and 8 percent of the global LNG trade coming from North America.

"While demand growth is driven by the Asia-Pacific region and especially China, supply growth for the international gas trade is dominated by private investments in LNG in Australia and North America,” IEA Executive Director Maria van der Hoeven said in a statement.

Air quality concerns in China have prompted the government to adopt tough plans to reduce pollution, and natural gas, which emits less carbon than coal, is emerging as part of the solution.

A potential problem for LNG is that high prices could dampen demand and encourage increased coal use, van der Hoeven said.

"Looking ahead, unless we see timely investment in new production and LNG facilities and the reversal of the recent cost inflation of LNG, only a very strong climate policy commitment could redirect Asia’s coal investment wave to gas,” she said.

The IEA also predicts that Europe won’t diversify its gas supplies significantly, and that European gas consumption won’t recover from a 2010 peak over the next five years because power demand is weak and government support for renewable energy is strong.